TREASURIES-U.S. yields rise on BOJ's Kuroda remarks, corporate supply

Reuters Staff

5 Min Read

* BOJ may consider exit strategy if inflation goal is
reached
* Bond yields pressured by expected huge corporate bond
supply
* Safe-haven bond holdings pared in wake of Trump's tariff
plan
* Traders eye weekend elections in Germany, Italy
(Updates market action, adds quote)
By Richard Leong
NEW YORK, March 2 (Reuters) - U.S. Treasury yields rose on
Friday, with the 10-year yield bouncing back from a three-week
low as the Bank of Japan's chief hinted at a possible exit from
its ultra-easy policies if inflation hits its target in its
fiscal 2019.
The bond market also came under pressure as investors
prepared a massive flood of corporate bond issuance next week,
led by a $40 billion deal from drugstore chain CVS,
according to IFR, a Thomson Reuters unit.
The yield rise reversed the prior day's fall tied to a
safe-haven bond market rally in reaction to President Donald
Trump's plan for stiff tariffs on steel and aluminum, which
raised fears of a trade war and surging costs for consumers.
"Markets don't want trade wars. The markets are pricing in
that risk," said Boris Rjavinski, senior rate strategist at
Wells Fargo Securities in New York. "The news from Japan also
played a role."
If the BOJ were to move away from its crisis-mode measures,
it would follow in the footsteps of the U.S. Federal Reserve and
other major central banks.
"The BOJ's board members expect that prices will reach 2
percent around fiscal 2019. If this happens, there's no doubt
that we will consider and debate an exit," Bank of Japan
Governor Haruhiko Kuroda told parliament.
The benchmark 10-year Treasury yield was 2.853
percent, up 5.1 basis points from late on Thursday. It touched a
three-week low of 2.793 percent earlier on Friday.
The two-year yield hit a two-week low of 2.197
percent before moving to 2.234 percent, up 2.8 basis points from
Thursday, according to Reuters data.
The spread between five-year and 30-year yields
was 50.6 basis points, wider than the 50.2 basis
points late on Thursday, Tradeweb data showed.
Bond yields had fallen late Thursday through overnight
trading on jitters about rising trade tension from Trump's
tariffs on imported steel and aluminum before the BOJ news
reversed their drop. Some analysts said it is unclear whether
the tariff would ignite an all-out trade war.
"The tariff is all intent purpose just a headline. There's
is even some push-back against it here in the U.S.," said Jason
Celente, senior portfolio manager at Insight Investment in New
York.
Meanwhile, traders await the outcomes of elections in
Germany and Italy on Sunday.
Pollsters forecast a hung parliament in Italy, with the
anti-establishment 5-Star Movement to be the biggest single
party. In Germany, Chancellor Angela Merkel's ruling
conservative party faces stiff resistance from the Social
Democrats to be part of an alliance.
Election results that produce weak governing bodies or ones
with anti-EU bias may spur safe-haven demand for Treasuries,
analysts said.
March 2 Friday 2:34PM New York / 1934 GMT
Price
US T BONDS JUN8 143-18/32 -25/32
10YR TNotes JUN8 120-64/256 -12/32
Price Current Net
Yield % Change
(bps)
Three-month bills 1.6125 1.6413 0.012
Six-month bills 1.8025 1.844 0.005
Two-year note 100-8/256 2.2337 0.028
Three-year note 99-158/256 2.3849 0.033
Five-year note 100-10/256 2.6165 0.043
Seven-year note 99-212/256 2.7772 0.048
10-year note 99-36/256 2.8497 0.048
30-year bond 97-156/256 3.1234 0.037
YIELD CURVE Last (bps) Net
Change
(bps)
10-year vs 2-year yield 61.40 2.00
30-year vs 5-year yield 50.60 0.45
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 25.25 -0.75
spread
U.S. 3-year dollar swap 21.75 -0.50
spread
U.S. 5-year dollar swap 9.50 -0.25
spread
U.S. 10-year dollar swap 0.75 0.00
spread
U.S. 30-year dollar swap -18.50 0.50
spread
(Reporting by Richard Leong; Editing by Jonathan Oatis and Tom
Brown)